List of NH companies getting tax credits remains private

CONCORD — A bill that would double the amount of money the state provides to companies in the form of research and development tax credits is receiving broad bipartisan support in New Hampshire.

But as the Senate prepares to vote on the legislation Thursday, one aspect of the program that troubled some lawmakers last year remains unchanged.

In New Hampshire, the list of private companies that receive R&D tax credits is shielded from public disclosure. That means citizens, elected officials — and even the director of the state's economic development office — don't know which companies are receiving tax breaks.

Without that information, lawmakers must rely solely on anecdotal evidence to measure whether the tax credits have spurred job growth or economic activity in the state.

New Hampshire is not alone in preventing disclosure of tax information. Of the 16 states that have tax credits for research and development investments, only six disclose the names of businesses receiving R&D credits and their credit amounts, according to a report compiled last year by the Connecticut Office of Legislative Research.

The issue of public disclosure was raised in New Hampshire last year when lawmakers were considering a proposal to increase the pot of money for research and development credits from $1 million to $2 million annually.

Chris Way, the interim director of the state's Division of Economic Development, said at the time, lawmakers were seeking data that would help them assess whether the tax credit has been a worthwhile investment for the state.

“One of the things that we heard last year is that they'd like to see if we could somehow find a little more information on how the credit is being used,” Way said.

The Division of Economic Development is now devising a plan to send out surveys to companies that apply for the tax credit in the coming year, in hopes of compiling a partial list. But lawmakers won't have that information when they cast votes on Thursday.

“There's a balance here ... between protecting confidentiality and understanding what the public has a right to know,” said Robert C. Pozen, a senior lecturer at the Harvard Business School, who was asked to comment on the issue of public disclosure last week.

Pozen said he believes the state could provide more detailed information to the public about research and development tax credits without compromising the confidentiality of tax records.

For example, Pozen said, the state could announce a list of the R&D credit recipients without identifying the size of the credit they received. To assess the effectiveness of the tax credit around job creation, lawmakers could require companies to disclose the number of workers they employed before and after receiving the credit. This measurement would still allow for businesses to remain confidential.

“I do think that the names of the companies and the average tax credit is still within the public domain,” said Pozen, who is also a senior research fellow at the Brookings Institution, and the former chairman of MFS Investment Management.

Unlike many other states, New Hampshire offers only modest tax incentives to companies that choose to do business here. The R&D credit, which was enacted five years ago, represents a fledgling step toward broadening those incentives.

The credit currently offers businesses a tax break of up to $50,000 to offset the labor costs associated with qualified manufacturing research and development work. The credit is first applied against the business profits tax. Any remainder may then be applied against the business enterprise tax.

In practice, the number of companies applying for tax credits has far exceeded the amount of money available in the program. During the past year, 111 companies submitted applications for a combined $4 million in credits. Those who received the maximum amount were capped at a sum of about $12,000.

The credit was set to expire after five years, but it was extended last August. Without further action from the Legislature, the credit will now expire on July 31, 2015.

SB1, the legislation coming up for a vote on Thursday, would continue funding the tax credit at $1 million annually through 2015, then bump up the figure to $2 million indefinitely. The proposal is being backed by Democratic Gov. Maggie Hassan and at least 21 members of the Senate.

Asked to comment on the issue of public disclosure, Way acknowledged a natural desire for transparency around tax credit information. However, he pointed out that state officials are already aware of many of the companies that benefit from state programs through day-to-day interactions.

“We're all trying to find ways that we can tell the story of this tax credit,” he said. “From where we sit, the tax credit is well regarded ... it does stimulate research and development. We hear that directly from the research community and the high-tech community that's taking advantage of it.”